Debt is not an abstract concept. Rather, people accrue debt for a reason. It might be to pay for medical bills, or to attend college, or to start a small business. Yet, because so many people struggle with debt, it can be easy to forget how debt occurs in the first place. To that end, today we’re going to focus on common sources of debt. We’ll explain what causes debt, what individuals can do to prevent taking on debt, and how they can get out of debt quickly.
Good vs Bad Debt
Having debt isn’t always a bad thing. In fact, paying off a loan successfully can boost your credit score significantly. The difference between good and bad debt is simply your ability to pay it off. If you’re capable of paying off a debt quickly, then it won’t present much of a problem. In general, avoid taking on debt that you’ll struggle to pay off in the future.
Of course, some debt is unavoidable. After all, if you get sick, you have to visit a doctor. And that costs money. Still, it’s possible to take preventative action now to lower your chances of going into debt later. For instance, you could visit an STD screening center and thus address a medical issue with a minor investment before it becomes a major problem. This is obviously good for your health, but it’s also beneficial for your financial standing as well.
Mitigate Against Debt
Again, while certain debts may be unavoidable, they can be delayed and mitigated against. Let’s consider another example: education. Almost everyone has to take out some sort of loan to attend college. Savvy individuals can ease their financial burden in the future by going to a community college for a year and then enrolling in a more traditional university. It’s a simple concept, but a powerful one: the less debt you take on, the sooner you’ll be able to pay it off.
Change Your Lifestyle
No one should ever get comfortable living with debt. The longer you let a debt exist, the more it will cost you. As such, it’s imperative to do everything you can to eliminate any debt you have as fast as possible. This may mean that you need to alter your lifestyle in the interim. While it would obviously be disappointing to go without certain creature comforts, your first priority should be to balance your accounts. Once you’re in a healthy financial position, you can then start to indulge a bit more. Trust us, it’s preferable to filing for bankruptcy!